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Half Year Results Presentation

Half Year Results Presentation. 6 months ended 30 June 2011 10 August 2011. Agenda. 1. Introduction and Highlights Ray King, Chief Executive 2. Financial Review Tom Singer, Group Finance Director 2.1 Group financial review 2.2 Segmental results 2.3 Cash, debt and solvency II

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Half Year Results Presentation

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  1. Half Year Results Presentation 6 months ended 30 June 2011 10 August 2011

  2. Agenda 1. Introduction and Highlights Ray King, Chief Executive 2. Financial Review Tom Singer, Group Finance Director 2.1 Group financial review 2.2 Segmental results 2.3 Cash, debt and solvency II 3. Strategy and Outlook Ray King, Chief Executive

  3. HY 2011 highlights • Good growth in the first half with a strong international performance - revenues up 6% - surplus before tax up 51% - underlying surplus up 35% (adjusted underlying surplus up 10%) - leverage 19% • Major operational highlights: • Strong results in Australia and Asia • Good performance in Europe despite difficult economic conditions • Care home profits stable notwithstanding government funding pressures • Acquisition of a leading hospital in Barcelona • Divestment of non-core businesses • Good progress towards Solvency II compliance

  4. Revenues and surplus by operating division HY10 (%) HY11 (%) Europe and North America International Markets Care Services Revenues Total: £3.71bn Total: £3.93bn Europe and North America International Markets Care Services Surplus Total: £244.1m Total: £162.1m • Geographic diversification • Increasing presence in International Markets

  5. Agenda 1. Introduction and Highlights Ray King, Chief Executive 2. Financial Review Tom Singer, Group Finance Director 2.1 Group financial review 2.2 Segmental results 2.3 Cash, debt and solvency II 3. Strategy and Outlook Ray King, Chief Executive

  6. HY 2011 financial overview Revenues (£m) Surplus (£m) (i) Underlying surplus (£m) (i) 244 3,929 247 3,714 184 35% 51% 6% 162 HY11 HY10 HY11 HY11 HY10 HY10 Net cash generated from operating activities (£m) Net cash generated from operating activities (£m) Leverage (ii) (%) Equity attributable to Bupa (£m) 4,615 395 23 4,366 4% pts 19 325 18% 6% HY11 FY10 HY11 HY11 FY10 HY10 • Before taxation expense • Gross debt (including hybrid debt) / gross debt plus equity

  7. Underlying surplus Underlying surplus before taxation: 2007-2011

  8. Financial income and expense • Stable levels of net financial income and expense (excluding return seeking assets and FX) • Improved return seeking asset performance off-set by marginally lower investment income on cash and higher bank borrowing costs

  9. Agenda 1. Introduction and Highlights Ray King, Chief Executive 2. Financial Review Tom Singer, Group Finance Director 2.1 Group financial review 2.2 Segmental results 2.3 Cash, debt and solvency II 3. Strategy and Outlook Ray King, Chief Executive

  10. Europe and North America – HY 2011 Financials Bupa Health and Wellbeing UK, The Bupa Cromwell Hospital, Sanitas, Health Dialog, Bupa Scandinavia • Divisional revenues flat and surplus up in difficult economic conditions • BHW UK: Underlying revenues and surplus up; margins improved Bupa Health Assurance sold January 2011 • Sanitas: Increased revenues and surplus; hospital acquisition (Barcelona) • Health Dialog: Revenues andsurplus down; action taken to reduce costs in the tough US environment • Bupa Cromwell: Increased revenues and surplus; major development project underwayHospital • Profits seasonally weighted in favour of 2nd 6 months

  11. International Markets – HY 2011 Financials Bupa Australia, Bupa International, Bupa Latin America, Max Bupa India, Bupa Hong Kong, Bupa Thailand, Bupa Arabia, Bupa China • Divisional revenues and surplus up primarily due to strong growth in Bupa Australia, Bupa International and favourable FX movements • Bupa Australia: Revenues and surplus increased due to operational efficiencies, FX movements and reduced integration costs • Bupa International: Revenues and surplus increased significantly • Bupa Hong Kong: Revenues and surplus increased • Bupa Thailand: Revenues up and small increase in surplus • Bupa Latin America: Revenues up but surplus slightly down due to rising claims costs • Bupa Arabia: Revenues up but surplus down due to a one-off regulatory cost • Max Bupa India: Completed first full year of trading

  12. Care Services – HY 2011 Financials Bupa Care Services UK, Bupa Care Services Australia, Bupa Care Services New Zealand, Sanitas Residencial, Bupa Home Healthcare • Divisional revenues and surplus continued to increase despite a challenging environment • Occupancy stable at 88% and freehold ownership of care homes of around 80% • UK: Revenues up and surplus marginally down due to higher catering and utility costs; occupancy 87% (HY10: 87%) • Australia: Revenues and surplus increased; occupancy remained high at 93% (HY10: 94%) • New Zealand: Revenues and surplus increased due to rising occupancy and good cost management; occupancy 95% (HY10: 94%) • Spain: Revenues and surplus increased; occupancy 81% (HY10: 81%)

  13. Agenda 1. Introduction and Highlights Ray King, Chief Executive 2. Financial Review Tom Singer, Group Finance Director 2.1 Group financial review 2.2 Segmental results 2.3 Cash, debt and solvency II 3. Strategy and Outlook Ray King, Chief Executive

  14. Net cash generated from operating activities

  15. Cash and investment portfolio (i) • Increase in cash due to growing businesses and favourable FX movements • Conservative investment portfolio • Approximately 88% of portfolio held in investments at AA- / Aa3 or better • £189m return seeking asset portfolio; equivalent to 6% of Group cash and investments • Excludes £173.6m of BHA cash and investments which were designated as ‘assets held for sale’ at FY10

  16. Borrowings • £900m revolving credit facility fully undrawn at HY 2011 • Leverage down to 19% • Gross debt (including hybrid debt) divided by (gross debt + equity) • As per (i) but hybrid classified as equity due to its technically perpetual nature

  17. Solvency II • Solvency II programme is continuing to progress in line with the January 2013 timeline • Good global engagement with functional and business teams • Successful participation in EIOPA stress test • Positive regulatory relationships and good lobbying outcomes • Bupa expects to be comfortably solvent by the compliance deadline

  18. Agenda 1. Introduction and Highlights Ray King, Chief Executive 2. Financial Review Tom Singer, Group Finance Director 2.1 Group financial review 2.2 Segmental results 2.3 Cash, debt and solvency II 3. Strategy and Outlook Ray King, Chief Executive

  19. Group strategic context and focus Market context • Long-term trends in chronic disease anddemographics underpin growth • People want more choice and control over their healthcare, especially online • Pressure on government budgets Bupa well placed • Strong brands, market positions and balance sheet • Skill base in key areas of ageing, chronic disease management and wellbeing • International reach and reputation provides strong platform for growth Focus • Existing major markets where Bupa is a key player and can sustain and develop its strong positions • Promising development opportunities in selected high growth economies in Asia and Latin America • Be seen as a healthcare partner by our customers to aid differentiation • Continued prudent financial management

  20. Political and regulatory landscape • UK: Continuing uncertainty in the public sector • Local authority funding pressures in aged care • Commission on Funding of Care and Support has reported • Health and Social Care Bill undergoing parliamentary scrutiny • OFT market study into private healthcare provision market • Australia: Government pushes healthcare reform agenda • 3rd attempt at means testing PHI 30% rebate • National Access Guarantee legislation likely to increase public patients in private hospitals • Spain: Government continues to get to grips with weak economy • Regional Governments increased interest in PPPs • Government prepared to cut public services post regional elections • General election in November • US: Starting to see implementation of Obama’s health reform laws • Uncertainty remains as Republicans challenge reform

  21. Current operating priorities Europe and North America • BHW UK: Customer retention; strong NPD pipeline • Sanitas: Strong SME and dental focus; tight control of provider costs • Health Dialog: Drive new product development to help Health Plan customers respond to health reform • Bupa Cromwell Hospital: Investment programme underway to upgrade facilities International Markets • Bupa Australia: Strong sales focus in good market conditions; ongoing synergy benefits • Bupa International: Increased access to customers via web and focus on regionalisation • Latin America: On-shore investment in Mexico to drive growth • Hong Kong / Thailand: Strong selling effort in good market conditions; investment in branding • India: Widening product portfolio and continued development of distribution network Care Services • Division: Focus on cost control and differentiation via dementia expertise; investment focus on private pay • UK: Prudent cost control as LAs look to reduce spending in current economic climate • Spain: Occupancy and differentiated dementia offering • Australia / New Zealand: Focus on good new build opportunities in stable market conditions • Bupa Home Healthcare: Operational efficiency and growth in core markets

  22. Outlook • The Group has benefited greatly from its strong international footprint and we expect continued momentum in the second half • Focus on operational efficiency, product development and customer retention in Europe / US where high unemployment levels persist • In the UK, we expect some short term pressure on aged care funding • While the world is going through a difficult phase, we are optimistic about our future. The long term drivers of growth remain strong

  23. Half Year Results Presentation6 months ended 30 June 2011 Questions and Answers www.bupa.com

  24. Appendix 1 The Bupa Group structure Bupa Group Europe and North America International Markets Care Services Divisions Bupa Health and Wellbeing UK Bupa Australia Bupa Care Services UK BupaCromwell Hospital Bupa International Bupa Care Services Australia Sanitas Bupa Latin America Bupa Care Services New Zealand Health Dialog Max Bupa India (JV) Sanitas Residencial Business Units Bupa Scandinavia Bupa Home Healthcare Bupa Hong Kong Bupa Thailand Bupa Arabia (JV) Bupa China

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